CALGARY -- Analysts watched in bewilderment as investors bailed out of oil and gas stocks yesterday, in spite of the potential threat to world energy supplies following Tuesday's terrorist attacks on the United States.

The Toronto Stock Exchange oil and gas index, in the first full day of trading since the deadly attacks Tuesday, fell more than 3 per cent to 8,844 points, a loss of 336 points. It gave up all the ground it gained Tuesday in the brief trading session before the exchange was shut down, when it shot up 183 points to 9,181.

"We're getting creamed," said Martin Molyneaux, research director at FirstEnergy Capital Corp. in Calgary.

Talisman Energy Inc. of Calgary led the way down, falling $4.65 to close at $55.85, its lowest level since July. The stock traded as low as $54.75 during the session. Analysts said Talisman is the most vulnerable oil firm because of its operations in Sudan, a company with a history of harbouring terrorists, including those linked to Osama bin Laden. The exiled Saudi extremist is considered the chief suspect behind the attacks, although conclusive evidence has not emerged.

But the retreat from oil and gas as a whole left many analysts, who had predicted investors would head for the sector over concerns that Tuesday's attacks threaten Middle East oil supplies. "It's the inverse of what we thought would happen," Mr. Molyneaux said. "We're all scratching our heads."

Among the senior producers, Alberta Energy Co. Ltd. was down $3.59 to $55.06, and PanCanadian Petroleum Ltd. down $2.43 to $43.07. Among the integrated oil companies, Imperial Oil Ltd. was down $1.35 to $43.90 and Petro-Canada down $1.51 to $40.50. In the service group, Precision Drilling Corp. fell 91 cents to $37.19.

Some analysts suggested the day should be considered exceptional because of the continued shutdown of the U.S. exchanges.

"It's perhaps an anomaly and people are waiting to see how the larger U.S. markets react," said Alistair Toward, an analyst with HSBC Securities Inc. in Calgary.

Nevertheless, analysts struggled to explain the day's stock movements. Most agreed part of the decline could be attributed to stocks retreating to levels before the attacks raised the possibility of supply disruptions from the Middle East and drove up the price of oil and oil company stocks.

Oil prices have since retreated to close to previous levels as statements from officials with the Organization of Petroleum Exporting Countries (OPEC) calmed fears of supply cutoffs.

"Oil supply has not been disrupted and there's no expectation that it will be disrupted," said Peter Linder, an analyst with Research Capital Corp. in Calgary.

In the longer term, he predicted oil and gas stocks would continue to drop as the weakening economy erodes demand for oil and gas.

Mr. Molyneaux said institutional investors looking for cash may also be liquidating some holdings.